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Cost analysis in sea transportation

Please define the cost allocation keys in sea transport business.

Think about owning a ship, but are not operating it efficiently and effectively so that your costs are always much more than your revenues. What will be your solution? What if you decide to charter your vessel? Please consider chartering types as well.

Notes 4.

Costs in sea transport depends on :

1- Kind of carriage ( bulk or container)
2- Size of the ship
3- Size of the fleet
4- Time spent on the sea
5- Time spent at the port
6- Liner or tramp services
7- Shipments ( cargos)

Costs can be classified under three major titles:

1- Costs that caused by owning the ships

a- Capital
b- Insurance
c- Maintenance and repair
d- Survey and inspection

2- Costs that caused by the voyage

a- Crew
b- Fuel and oil
c- Equipments and spare parts
d- Loading/unloading - Terminal handling
e- Port

3- Other

a- Agency commision
b- Cargo insurance etc...

Solution Preview

Please define the cost allocation keys in sea transport business.

The cost allocation keys are the formulas or rule used to allocate shared costs to the part of the business that should absorb those costs.

You will need to accumulate the cost per ship and the cost per voyage.

Here are my suggested cost allocation keys:

1- Costs per ship:

a- Capital (allocate based on original cost of each ship)
b- Insurance (allocate based on the insured value of each ship)
c- Maintenance and repair (assign directly to the ship being repaired)
d- Survey and inspection (allocate directly the ship being repaired)

2- Costs per voyage :

a- Crew (assign to each voyage based on labor hours worked on each voyage)
b- Fuel and oil (assign to the voyage that used it)
c- Equipments and spare parts (equipment - allocate based on hours used; spare parts assign to voyage consuming the parts)
d- Loading/unloading - Terminal handling (allocate based on ...

Solution Summary

The response is 554 words. I have described how you would accumulate your costs in this business, given you two potential reports that would help you find problems with the business and described how the ship features impact capacity. I had discussed situations where you might find chartering a promising solution and situations when chartering is not likely to improve the operations.